What is the most likely path forward for the ACA exchanges?

I had lunch yesterday with a friend and I was asked that question (and I asked it in turn).  My answer, with some ex post editing, was this:

1. The chance of “no smooth resolution” for the health care exchanges crisis is now 60-40.  Not long ago I thought it was 20-80.

2. The Obama administration is claiming the exchanges might be ready soon to stem Democratic defections and to keep the policy locked in, but in reality they now know there is no chance for timeliness (NB: this sentence is true with 60-40 probability, not unconditionally true).

3. More parts of the thing will be working by late November, but not enough for it to serve as a functioning enrollment system, much less encourage “the invincibles” to sign up.  They will figure, correctly, they don’t have to bother with the whole thing until they hear from peers, and from the media, that the process is as smooth and as easy as Orbitz.  (Oddly, Tea Party attempts to get young people to resist the mandate have the counterintuitive property of increasing awareness of the sign up requirement.  Disengagement, not fiery opposition, is the real enemy of the law.)

4. Come January 1, hundreds of thousands of Americans will lose their individual coverage packages for not meeting ACA standards.  Most of them won’t have ready replacements.  This will be a big mainstream media story, not just a FoxNews story.  There will be easily identifiable victims, expressing sorrow or rage or both in front of the camera.  Left-wing bloggers will express outrage that Republicans express outrage over the existence of individuals with no insurance coverage.  Republicans will express outrage that left-wing bloggers express outrage, etc.

5. Democrats will propose various ACA fixes, and Republicans will reject them, claiming that the law requires a more fundamental restructuring.  That standoff will not be readily resolved and it will become the “new debt-ceiling crisis.”  Democratic defections will be a problem for Obama.

6. The exchanges will be mostly working by March 2014, but by then the risk pool will be dysfunctional.  In the meantime, real net prices will creep up, if only through implicit rationing and restrictions on provider networks.  The Obama administration will attempt to address this problem — unsuccessfully — through additional regulation.

7. By October 2014, no one will think the exchanges are a satisfactory solution, except for 17 state exchanges which will be running reasonably well.  Some of the state-level exchanges, by the way, will have more serious problems than is currently evident, mostly on the back end.

8. Chris Christie will campaign against ACA and beat Hillary Clinton in the general election.  Upon assuming office he will place price controls on the insurance plans in the individual market, repeal much but not all of the federal financial support for the Medicaid expansion, and keep many other parts of ACA, while claiming to have repealed the whole thing.  Enough Democrats will go along with this, as public opinion will have shifted toward the Republican side on this issue.  The individual market still won’t be working very well.  The exchanges will be working fine in the technical sense, but skittishness, political risk, and the adverse selection death spiral will have led the insurance companies to withhold high quality policies from that side of the market.


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